We see a lot of hoardings and ads that say that the building or flat in Bangalore has a pre-approved home loan sanctioned to that project making it easy for buyers to avail loans at the bank in their endeavor of buying their dream home.
let us dig into this in a little more detail :
What is a pre-approved loan ?
A pre-approved loan is a document that is given by the bank to you to showcase to the buyer, your intent of buying property is very much real and serious. It says that the person is qualified by the bank to avail a loan for the amount mentioned in the document.
It is not the sanction of a loan. The bank just sums you up based on your salary and other income flowing in, if you are eligible to take on a loan and actually fulfill the loan in the agreed time. It is more of an internal check that it can give this person a loan upto this number considering the actual of their annual tax returns, salary and other income sources.
One must be aware that the pre-approved loan amount may not be the exact amount that finally gets sanctioned at the end, by the bank.
Why is the pre-approved loan important?
It gives the buyer a typical estimate of the loan they can avail, this can give them a range of properties that fall in their budget range.
It is also a indication to the seller, that this person can avail a loan from the bank to pay him or her for the property sale.
The document is valid for 6 months, wherein one can finalize on a property and ask the bank to approve the loan at the earliest.
What does it mean in terms of the legality of the property under question ?
The pre-approved sanction makes no claims on the legality of the property in question. This is to be clearly understood by everyone, that the banks have no legal obligation to verify the entirety of the documents of the builders. i,e in case there are problems that come in the long run, the bank shall naturally ask you to pay your dues.
The pre-approved loan sanction that most builders and sellers suggest one to obtain through certain banks of their choice, the legal document flow gets done internally and at most times it comes favorable towards the builders since the bank too is getting benefited with the home-loan procedures. It is best that one does their due diligence, checking the Khata, encumbrance certificates, title deeds and other documents of the property before taking the plunge.
The pre- approved loan certificate does not guarantee that the bank shall sanction a loan to that amount, it may vary with subject to conditions of the property. The final rates of interest also can vary at the time of the actual loan-sanctioning.
Although projects with a pre-approved loan sanction makes work easier for a lot of buyers it is recommended that they do check the legal aspects of the property with property verification lawyers and then decide to invest in the project.
Also interestingly, this document shall in no way guarantee or state that the builder/ developer shall actually complete the building in the stipulated time.
So it is better to err on the side of caution and verify the legal aspects of the property even if there are pre-approved loan sanctions present for a project. It is better safe than sorry.